![]() ![]() This includes not just land, but anything that comes from the land. The producer secures the best combination by applying the principles of equi-marginal returns and substitution. The income that resource owners earn in return for land resources is called rent. This table shows who owns the factors of production in four of the most important economic systems, and what these factors are valued for in each system. Definition of Production:įor example, in a capitalist economy, the factors of production are owned by individuals who use them for their own profit. ![]() In economics, a production function is a way of calculating what comes out of production to what has gone into it. How much you have of these things can affect your production. You need supplies, equipment, resources, and some know-how, too. If you have ever been paid for a job, you have contributed labor resources to the production of goods or services. It includes an artist’s creation of a painting as well as the work of the pilot flying the airplane overhead. Labor resources include the work done by the waiter who brings your food at a local restaurant as well as the engineer who designed the bus that transports you to school. Firms use the production function to determine how much output they should produce given the price of a good, and what combination of inputs they should use to produce given the price of capital and labor. The traditional division of factors of production distinguishes labour, land and capital, with a fourth factor, enterprise, some-times separated from the rest.
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